E-Currency and the future of anonymity

A new form of digital peer-to-peer currency has quickly gained traction on the Internet. It is “Bitcoins,” a form of money that exists wholly in cyberspace, with no centralized issuing authority.

Like most standard currencies, Bitcoins operates through an exchange and can be used wherever the currency is deemed legitimate. However, unlike most standard currencies, Bitcoin transactions are anonymous and encrypted and can be used solely over the Internet for the exchange of goods and services. The transactions involving Bitcoins, while comparatively few in number, have exponentially increased in the past several months. However, the technology is plagued by a lack of stability, security and liquidity, and the currency is still in its infancy.

Although debates rage over the practicality of Bitcoins, it’s unlikely that virtual currency will ever go mainstream or feasibly replace “hard” currency. But the emphasis on large-scale feasibility misses the forest for the trees. Currently, several websites such as Wikileaks accept Bitcoin donations, but aside from these niche uses, Bitcoins are largely used to facilitate encrypted, legally dubious transactions over the Internet. Virtual currency thus occupies a quasi-legal status similar to Napster: a legal technology being implemented primarily for the use of illegal activity.

In this light, Bitcoins have much more relevance in the ever-shifting field of Internet piracy. Law enforcement officials are currently frustrated by the currency’s existence, since transactions involving Bitcoins are impossible to trace to individual users, and accordingly, Bitcoins represent an expansion in Internet piracy. Users can now not only anonymously violate copyright infringement but also can anonymously traffic drugs and other contraband online.

Online currency is thus symptomatic of a larger phenomenon: the ability of individuals to mask themselves over the Internet. While in the past, online transactions were limited to credit or debit card purchases and thus traceable by law enforcement, the nature of Bitcoins permit only the transactions—and not the identity of the users involved—to be published publically.

This shift completely changes the character of online piracy. Previously, online piracy was marked by the free exchange of copyrighted materials, largely uploaded by volunteers for the sake of spreading information and content over the web. Piracy thus largely remained “grassroots,” so to speak. However, the introduction of Bitcoins, coupled with the rise of illegal online transactions, adds a monetary element into the mix. Now, there is a distinct financial incentive to engage in illegal activity on the Internet, and specifically, a distinct financial incentive to organize. Is it only a matter of time before we begin to see online drug cartels?

Internet piracy, in the form of copyright infringement, is relatively benign. The producers of copyrighted media lose out financially, but nobody besides the individual consumer is monetarily better off. Yet the new forms of piracy that are proliferating on the Internet are far more dangerous. Any time big money is involved, the threat of violence invariably looms close.

Currently, such a threat is a bit off into the distance, as statistical methods currently used by law enforcement officials would make any large-scale transactions easily traceable. But this only applies to the status quo. If Bitcoins do not find a way to make such transactions possible while maintaining anonymity, another virtual currency very well may.

There is no easy solution to these problems that arise with online currency. But one thing is certain: We cannot treat them merely like the piracy that existed in the past, nor can we treat them like just another currency. Rather, we must recognize that online currency is like nothing we have ever encountered before.

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jack

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brucebo

One of the main, if not THE main, benefit of bitcoin is that it facilitates low overhead electronic transactions. All current mainstream electronic transaction requires a fee, usually paid by the vendor, to the banksters. This is essentially a private tax on all the trillions of dollars of electronic transactions. Bitcoin cuts the banksters out of the loop.

A.H.

The author has an intellectually dim grasp of liberty and free trade. Cash is anonymous too and can be sent by mail for a user-to-user online transaction. By the author’s logic, all cash transactions if they are undocumented should be treated as suspicious and should probably be made illegal as well.

aeae1

i would disagree with you here a bit, the main difference with bitcoins is that there is no way to bust a seller. with cash either transferred in person or sent by mail, you will either need to see the seller face to face or know his mailing address. now, it would become extremely difficult if not impossible to find the seller.

garbados

Disagree. There are electronic cash solutions, such that one could facilitate a trade in cash with pure anonymity, with neither party truly knowing the other’s identity, or anything about them. If Bitcoin should be regulated or forbidden because it can perform such trades, then reasonably so should cash.

jostmey

Piracy, Piracy, Piracy!

Bitcoin are about more than Piracy. It would be wrong to think that bitcoin is only used for illegal activity. In fact, you use it like any other old currency. You can buy anything for laptops to food with it (see searchbitcoin.com).

I mean, USD is used to buy drugs and prostitutes. But no one complains about cash.

alex

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